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Wipro exceeds expectations as profit surges

Indian software exporter predicts revenue to grow 2.8% in third quarter

MUMBAI (NewsRise) -- Wipro reported a 35% jump in second-quarter net profit aided by tax cuts and forecast a better-than-expected revenue growth in the current quarter, underlining signs of a recovery at the Indian software exporter.

Bengaluru-based Wipro predicted its dollar-denominated revenue will sequentially grow 2.8% at best or 0.8% at worst. Analysts were expecting the company to predict at best a 2% growth or no growth at worst. The dollar revenue grew 0.5% in the quarter ended in September.

"We had a good in-quarter execution on both revenues and margins. The overall growth was broad-based with six out of seven industry verticals growing," Abidali Z. Neemuchwala, the chief executive of Wipro, said in a statement.

"The order book in the second quarter is strong. The guidance reflects the execution of that order book," Neemuchwala told reporters at a news conference.

Wipro, backed by billionaire Azim Premji, has been struggling to snap out of the low-growth mode over the past few years as slowing spending on core information technology services and weak execution of orders cast a pall over the company's financial performance. The company's revenue in constant currency terms barely grew 5.4% in the last fiscal year, even as larger rivals such as Tata Consultancy Services and Infosys grew more than 11% and 9%, respectively.

For the quarter ended in September, Wipro's net profit jumped to 25.5 billion rupees ($357 million) from 18.9 billion rupees a year ago. Analysts were expecting a net income of 22.73 billion rupees, according to Refinitiv data. Revenue grew 4% to 151.26 billion rupees.

The effective tax rate in the last quarter stood at 18.3%, compared with 22.1% in the year-earlier period, the company said.

Margins contracted 30 basis points to 18.1%, weighed by the impact of wage hikes. Still, it beat the 17.3% forecast by ICICI Direct Research.

"Wipro's in-line revenue, better-than-expected margins, and decent guidance range bodes well," ICICI Direct said in an e-mail. The company's better utilization of employees is likely to lead to improved margin trajectory in the following quarters, it added.

Wipro's results come close on the heels of the stellar financial performance of cross-town rival Infosys, which last week raised the lower end of its dollar revenue growth outlook, citing strong demand across its business segments. Infosys said it expects constant currency revenue to grow 9% to 10% in the fiscal year that began on April 1, compared with 8.5% to 10% it had forecast in July.

India's largest outsourcing company Tata Consultancy Services reported a weaker-than-expected profit earlier this month and remained wary of its ability to post double-digit revenue growth this year. TCS cited the slowing investments in the financial services and retail businesses that account for nearly half of its revenue, for a weaker second half.

An escalating trade row between the U.S. and China and fears of Britain exiting from the European Union without a trade deal have stirred fears of a global slowdown that will cap technology spending by clients.

Wipro's revenue from financial service business grew 4.3%, while the digital business, which accounts for nearly 40% of its revenue, grew 29%. Neemuchwala said the growth in financial services decelerated due to spending curbs by banks and clients in the capital markets.

Ahead of the results, Wipro shares gained 0.1% in Mumbai trading, while the benchmark S&P BSE Sensex rose 0.8%.

--Dhanya Ann Thoppil

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